The American bank First Republic Bank acquired by JP Morgan

The headquarters of JP Morgan Bank in New York. © Mike Segar / Reuters

Text by: RFI Follow

3 min

It is finally the largest bank in the United States, JP Morgan, which will buy most of First Republic, the American regional bank in difficulty. The speed with which the regulator has acted shows that it wants to avoid panic among depositors at all costs.

Advertising

Read more

The contagion effect has been avoided, seems to say the powerful agency that guarantees bank deposits in the United States, the Federal Deposit Insurance Corporation (FDIC). To facilitate JP Morgan's takeover of the bank, the agency made an exception that the law allows in the case of a failed bank.

This weekend, First Republic was placed by the FDIC at auction. JP Morgan has acquired. The bank bought most of First Republic. That's $173 billion in loans and about $30 billion in securities.

The San Francisco bank was under pressure since the failures of two other institutions with similar profiles: Silicon Valley Bank and Signature. In just two months, First Republic has seen its stock lose more than 97% on the stock market.

The rescue plan for eleven major US banks was not enough to reassure customers. They withdrew a total of some $100 billion in deposits in the first quarter. His action, already in bad shape, took a nosedive. To extinguish the fire, the regulator accepted JP Morgan's offer. Hoping to close the episode of the banking crisis.

This is the second largest bank failure in U.S. history after Washington Mutual in 2008. The latter's assets had also been largely acquired by JPMorgan, which, under the leadership of its boss Jamie Dimon, has several times rescued troubled institutions.

Under Monday's deal, the country's largest bank will recover all of First Republic's deposits and almost all of its assets, while its branches will be able to reopen on Monday under the usual patterns.

Stabilizing the system

First Republic, founded in 1985 and based in San Francisco, was worth Friday at the close only $ 654 million on the stock market, against more than $ 20 billion at the beginning of the year. She was known to have a wealthy clientele, depositing large sums in accounts and repaying loans well. But many of them became frightened after the bankruptcies of SVB and Signature. And it had in its accounts a number of mortgages and fixed-rate investments, which mechanically lost value with the recent rise in interest rates.

Observers were worried about a risk of contagion after the March insolvencies, which also created turmoil across the Atlantic and accelerated the fall of Credit Suisse. These fears have eased somewhat after the publication in the last two weeks by several small and medium-sized banks of financial balance sheets holding the road.

« 

First Republic was identified as a problem bank as early as mid-March and the announcement of its closure is not a new reason to worry " said Nicolas Veron, economist for the think tanks PIIE and Bruegel, before the bankruptcy was formalized.

JP Morgan shares climbed 5% in electronic trading on Wall Street. First Republic's fell by 35%. "We were not looking for this agreement, but it has financial advantages and allows us to strengthen ourselves in the market," especially in wealth management, said Monday, May 1, the chief financial officer of JPMorgan, Jeremy Barnum.

(

And with AFP)

Newsletter Receive all the international news directly in your mailbox

I subscribe

Follow all the international news by downloading the RFI application

Read on on the same topics:

• United States
• Finance